Question:

1. Joe won a lottery jackpot that will pay him $12,000 each year for the next ten years. If the market interest rates are currently 12%, how much does the lottery have to invest today to pay out this prize to Joe over the next ten years?
   (This way would pay the lottery prize and preserves the principal)
   Using Excel we get

   Year	1	2	3	4	5	6	7	8	9	10
   Present Flow	12000	10714.29	9566.327	8541.363	7626.217	6809.122	6079.573	5428.191	4846.599	4327.32
   Future Flow	12000	12000	12000	12000	12000	12000	12000	12000	12000	12000
   PV	$75,939

   which means that \(P=\\)75,939$. In other words, if the lottery invests this amount in a bond, at the market rate, then they’ll get $12,000 annually (This way the principal is not preserved).
2. Mary just deposited $33,000 in an account paying 10% interest. She plans to leave the money in this account for seven years. How much will she have in the account at the end of the seventh year?
3. Mary and Joe would like to save up $10,000 by the end of three years from now to buy new furniture for their home. They currently have $2500 in a savings account set aside for the furniture. They would like to make equal year end deposits to this savings account to pay for the furniture when they purchase it three years from now. Assuming that this account pays 8% interest, how much should the year end payments be?
4. Donna and Sherman Terrell are preparing a budget for 2003. Donna is a systems analyst with an airplane manufacturer, and Sherman is working on a master's degree in educational psychology. The Terrels do not have any children or other dependents. Donna estimates her salary will be about $39,996 in 2003; Sherman expects to work only during the summer months, doing painting and remodeling work for a building contractor. He anticipates an income from those activities of $3000 a month in June, July, and August. Sherman does have a scholarship that pays his tuition and also provides $3,600 a year of which $2400 is payable in February and $1200 is payable in October. The Terrels don't expect to have any other income in 2003.

Donna and Sherman have listed their expected total expenses in 2003 as follows:

The Terrels will begin 2003 with about $1,000 in liquid assets, and they prefer not to draw this balance below $600 at any time during the year.

1. Prepare a monthly income and expense plan for the Terrels in 2003.
2. On the basis of the plan you have just prepared, discuss the Terrels expected financial situation in 2003. Explain if you foresee any difficulties.
3. During the quarter break in April, Sherman's employer landed a major remodeling project and asked for Sherman's help. Sherman agreed, and he expects to earn $1,500 from the job before taxes but probably won't receive a check until early June. Discuss how this unexpected event might affect the Terrels' activities and their budget for the balance of 2003. It is not necessary to prepare a revised monthly income and expense plan but do refer to specific accounts and amounts (make appropriate assumptions) in your discussion.

Price: $2.99

Solution: The downloadable solution consists of 7 pages
Deliverable: Word Document